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My thoughts on Adobe buying Magento for $1.68 billion

Dries Buytaert - 22 May 2018 - 12:20pm

Yesterday, Adobe announced that it agreed to buy Magento for $1.68 billion. When I woke up this morning, 14 different people had texted me asking for my thoughts on the acquisition.

Adobe acquiring Magento isn't a surprise. One of our industry's worst-kept secrets is that Adobe first tried to buy Hybris, but lost the deal to SAP; subsequently Adobe tried to buy DemandWare and lost out against Salesforce. It's evident that Adobe has been hungry to acquire a commerce platform for quite some time.

The product motivation behind the acquisition

Large platform companies like Salesforce, Oracle, SAP and Adobe are trying to own the digital customer experience market from top to bottom, which includes providing support for marketing, commerce, personalization, and data management, in addition to content and experience management and more.

Compared to the other platform companies, Adobe was missing commerce. With Magento under its belt, Adobe can better compete against Salesforce, Oracle and SAP.

While Salesforce, SAP and Oracle offer good commerce capability, they lack satisfactory content and experience management capabilities. I expect that Adobe closing the commerce gap will compel Salesforce, SAP and Oracle to act more aggressively on their own content and experience management gap.

While Magento has historically thrived in the SMB and mid-market, the company recently started to make inroads into the enterprise. Adobe will bring a lot of operational maturity; how to sell into the enterprise, how to provide enterprise grade support, etc. Magento stands to benefit from this expertise.

The potential financial outcome behind the acquisition

According to Adobe press statements, Magento has achieved "approximately $150 million in annual revenue". We also know that in early 2017, Magento raised $250 million in funding from Hillhouse Capital. Let's assume that $180 million of that is still in the bank. If we do a simple back-of-the-envelope calculation, we can subtract this $180 million from the $1.68 billion, and determine that Magento was valued at roughly $1.5 billion, or a 10x revenue multiple on Magento's trailing twelve months of revenue. That is an incredible multiple for Magento, which is primarily a licensing business today.

Compare that with Shopify, which is trading at a $15 billion dollar valuation and has $760 million of twelve month trailing revenue. This valuation is good for a 20x multiple. Shopify deserves the higher multiple, because it's the better business; all of its business is delivered in the cloud and at 65% year-over-year revenue growth, it is growing much faster than Magento.

Regardless, one could argue that Adobe got a great deal, especially if it can accelerate Magento's transformation from a licensing business into a cloud business.

Most organizations prefer best-of-breed

While both the product and financial motivations behind this acquisition are seemingly compelling, I'm not convinced organizations want an integrated approach.

Instead of being confined to proprietary vendors' prescriptive suites and roadmaps, global brands are looking for an open platform that allows organizations to easily integrate with their preferred technology. Organizations want to build content-rich shopping journeys that integrate their experience management solution of choice with their commerce platform of choice.

We see this first hand at Acquia. These integrations can span various commerce platforms, including IBM WebSphere Commerce, Salesforce Commerce Cloud/Demandware, Oracle/ATG, SAP/hybris, Magento and even custom transaction platforms. Check out Quicken (Magento), Weber (Demandware), Motorola (Broadleaf Commerce), Tesla (custom to order a car, and Shopify to order accessories) as great examples of Drupal and Acquia working with various commerce platforms. And of course, we've quite a few projects with Drupal's native commerce solution, Drupal Commerce.

Owning Magento gives Adobe a disadvantage, because commerce vendors will be less likely to integrate with Adobe Experience Manager moving forward.

It's all about innovation through integration

Today, there is an incredible amount of innovation taking place in the marketing technology landscape (full-size image), and it is impossible for a single vendor to have the most competitive product suite across all of these categories. The only way to keep up with this unfettered innovation is through integrations.

An image of the Marketing Technology Landscape 2018. For reference, here are the 2011, 2012, 2014, 2015, 2016 and 2017 versions of the landscape. It shows how fast the marketing technology industry is growing.

Most customers want an open platform that allows for open innovation and unlimited integrations. It's why Drupal and Acquia are winning, why the work on Drupal's web services is so important, and why Acquia remains committed to a best-of-breed strategy for commerce. It's also why Acquia has strong conviction around Acquia Journey as a marketing integration platform. It's all about innovation through integration, making those integrations easy, and removing friction from adopting preferred technologies.

If you acquire a commerce platform, acquire a headless one

If I were Adobe, I would have looked to acquire a headless commerce platform such as Elastic Path, Commerce Tools, Moltin, Reaction Commerce or even Salsify.

Today, there is a lot of functional overlap between Magento and Adobe Experience Manager — from content editing, content workflows, page building, user management, search engine optimization, theming, and much more. The competing functionality between the two solutions makes for a poor developer experience and for a poor merchant experience.

In a headless approach, the front end and the back end are decoupled, which means the experience or presentation layer is separated from the commerce business layer. There is a lot less overlap of functionality in this approach, and it provides a better experience for merchants and developers.

Alternatively, you could go for a deeply integrated approach like Drupal Commerce. It has zero overlap between its commerce, content management and experience building capabilities.

For Open Source, it could be good or bad

How Adobe will embrace Magento's Open Source community is possibly the most intriguing part of this acquisition — at least for me.

For a long time, Magento operated as Open Source in name, but wasn't very Open Source in practice. Over the last couple of years, the Magento team worked hard to rekindle its Open Source community. I know this because I attended and keynoted one of its conferences on this topic. I have also spent a fair amount of time with Magento's leadership team discussing this. Like other projects, Magento has been taking inspiration from Drupal.

For example, the introduction of Magento 2 allowed the company to move to GitHub for the first time, which gave the community a better way to collaborate on code and other important issues. The latest release of Magento cited 194 contributions from the community. While that is great progress, it is small compared to Drupal.

My hope is that these Open Source efforts continue now that Magento is part of Adobe. If they do, that would be a tremendous win for Open Source.

On the other hand, if Adobe makes Magento cloud-only, radically changes their pricing model, limits integrations with Adobe competitors, or doesn't value the Open Source ethos, it could easily alienate the Magento community. In that case, Adobe bought Magento for its install base and the Magento brand, and not because it believes in the Open Source model.

This acquisition also signals a big win for PHP. Adobe now owns a $1.68 billion PHP product, and this helps validate PHP as an enterprise-grade technology.

Unfortunately, Adobe has a history of being "Open Source"-second and not "Open Source"-first. It acquired Day Software in July 2010. This technology was largely made using open source frameworks — Apache Sling, Apache Jackrabbit and more — and was positioned as an open, best-of-breed solution for developers and agile marketers. Most of that has been masked and buried over the years and Adobe's track record with developers has been mixed, at best.

Will the same happen to Magento? Time will tell.

Categories: Drupal

Dries Buytaert: My thoughts on Adobe buying Magento for $1.68 billion

Planet Drupal - 22 May 2018 - 12:20pm

Yesterday, Adobe announced that it agreed to buy Magento for $1.68 billion. When I woke up this morning, 14 different people had texted me asking for my thoughts on the acquisition.

Adobe acquiring Magento isn't a surprise. One of our industry's worst-kept secrets is that Adobe first tried to buy Hybris, but lost the deal to SAP; subsequently Adobe tried to buy DemandWare and lost out against Salesforce. It's evident that Adobe has been hungry to acquire a commerce platform for quite some time.

The product motivation behind the acquisition

Large platform companies like Salesforce, Oracle, SAP and Adobe are trying to own the digital customer experience market from top to bottom, which includes providing support for marketing, commerce, personalization, and data management, in addition to content and experience management and more.

Compared to the other platform companies, Adobe was missing commerce. With Magento under its belt, Adobe can better compete against Salesforce, Oracle and SAP.

While Salesforce, SAP and Oracle offer good commerce capability, they lack satisfactory content and experience management capabilities. I expect that Adobe closing the commerce gap will compel Salesforce, SAP and Oracle to act more aggressively on their own content and experience management gap.

While Magento has historically thrived in the SMB and mid-market, the company recently started to make inroads into the enterprise. Adobe will bring a lot of operational maturity; how to sell into the enterprise, how to provide enterprise grade support, etc. Magento stands to benefit from this expertise.

The potential financial outcome behind the acquisition

According to Adobe press statements, Magento has achieved "approximately $150 million in annual revenue". We also know that in early 2017, Magento raised $250 million in funding from Hillhouse Capital. Let's assume that $180 million of that is still in the bank. If we do a simple back-of-the-envelope calculation, we can subtract this $180 million from the $1.68 billion, and determine that Magento was valued at roughly $1.5 billion, or a 10x revenue multiple on Magento's trailing twelve months of revenue. That is an incredible multiple for Magento, which is primarily a licensing business today.

Compare that with Shopify, which is trading at a $15 billion dollar valuation and has $760 million of twelve month trailing revenue. This valuation is good for a 20x multiple. Shopify deserves the higher multiple, because it's the better business; all of its business is delivered in the cloud and at 65% year-over-year revenue growth, it is growing much faster than Magento.

Regardless, one could argue that Adobe got a great deal, especially if it can accelerate Magento's transformation from a licensing business into a cloud business.

Most organizations prefer best-of-breed

While both the product and financial motivations behind this acquisition are seemingly compelling, I'm not convinced organizations want an integrated approach.

Instead of being confined to proprietary vendors' prescriptive suites and roadmaps, global brands are looking for an open platform that allows organizations to easily integrate with their preferred technology. Organizations want to build content-rich shopping journeys that integrate their experience management solution of choice with their commerce platform of choice.

We see this first hand at Acquia. These integrations can span various commerce platforms, including IBM WebSphere Commerce, Salesforce Commerce Cloud/Demandware, Oracle/ATG, SAP/hybris, Magento and even custom transaction platforms. Check out Quicken (Magento), Weber (Demandware), Motorola (Broadleaf Commerce), Tesla (custom to order a car, and Shopify to order accessories) as great examples of Drupal and Acquia working with various commerce platforms. And of course, we've quite a few projects with Drupal's native commerce solution, Drupal Commerce.

Owning Magento gives Adobe a disadvantage, because commerce vendors will be less likely to integrate with Adobe Experience Manager moving forward.

It's all about innovation through integration

Today, there is an incredible amount of innovation taking place in the marketing technology landscape (full-size image), and it is impossible for a single vendor to have the most competitive product suite across all of these categories. The only way to keep up with this unfettered innovation is through integrations.

For reference, here are the 2011, 2012, 2014, 2015, 2016 and 2017 versions of the landscape. It shows how fast the landscape is growing.

Most customers want an open platform that allows for open innovation and unlimited integrations. It's why Drupal and Acquia are winning, why the work on Drupal's web services is so important, and why Acquia remains committed to a best-of-breed strategy for commerce. It's also why Acquia has strong conviction around Acquia Journey as a marketing integration platform. It's all about innovation through integration, making those integrations easy, and removing friction from adopting preferred technologies.

If you acquire a commerce platform, acquire a headless one

If I were Adobe, I would have looked to acquire a headless commerce platform such as Elastic Path, Commerce Tools, Moltin, Reaction Commerce or even Salsify.

Today, there is a lot of functional overlap between Magento and Adobe Experience Manager — from content editing, content workflows, page building, user management, search engine optimization, theming, and much more. The competing functionality between the two solutions makes for a poor developer experience and for a poor merchant experience.

In a headless approach, the front end and the back end are decoupled, which means the experience or presentation layer is separated from the commerce business layer. There is a lot less overlap of functionality in this approach, and it provides a better experience for merchants and developers.

Alternatively, you could go for a deeply integrated approach like Drupal Commerce. It has zero overlap between its commerce, content management and experience building capabilities.

For Open Source, it could be good or bad

How Adobe will embrace Magento's Open Source community is possibly the most intriguing part of this acquisition — at least for me.

For a long time, Magento operated as Open Source in name, but wasn't very Open Source in practice. Over the last couple of years, the Magento team worked hard to rekindle its Open Source community. I know this because I attended and keynoted one of its conferences on this topic. I have also spent a fair amount of time with Magento's leadership team discussing this. Like other projects, Magento has been taking inspiration from Drupal.

For example, the introduction of Magento 2 allowed the company to move to GitHub for the first time, which gave the community a better way to collaborate on code and other important issues. The latest release of Magento cited 194 contributions from the community. While that is great progress, it is small compared to Drupal.

My hope is that these Open Source efforts continue now that Magento is part of Adobe. If they do, that would be a tremendous win for Open Source.

On the other hand, if Adobe makes Magento cloud-only, radically changes their pricing model, limits integrations with Adobe competitors, or doesn't value the Open Source ethos, it could easily alienate the Magento community. In that case, Adobe bought Magento for its install base and the Magento brand, and not because it believes in the Open Source model.

This acquisition also signals a big win for PHP. Adobe now owns a $1.68 billion PHP product, and this helps validate PHP as an enterprise-grade technology.

Unfortunately, Adobe has a history of being "Open Source"-second and not "Open Source"-first. It acquired Day Software in July 2010. This technology was largely made using open source frameworks — Apache Sling, Apache Jackrabbit and more — and was positioned as an open, best-of-breed solution for developers and agile marketers. Most of that has been masked and buried over the years and Adobe's track record with developers has been mixed, at best.

Will the same happen to Magento? Time will tell.

Categories: Drupal

UK government takes aim at online games in Internet Safety Strategy response

Social/Online Games - Gamasutra - 22 May 2018 - 12:13pm

Video games were listed among the many online spaces being scrutinized by the United Kingdom government ahead of new laws that would aim to make the internet and social media safer for UK citizens. ...

Categories: Game Theory & Design

Initiative Magazine issue 11 Out Now

Tabletop Gaming News - 22 May 2018 - 12:00pm
When you want to fill your day with gaming, a gaming magazine is a perfect way to do so. In this instance, we have the 11th issue of Initiative Magazine. It’s loaded with articles on such items as Gangs of Rome, the continuation of their RPG adventure, and a look at games like the Batman […]
Categories: Game Theory & Design

Podcast Radio

Tabletop Gaming News - 22 May 2018 - 11:00am
Monday’s gone. Tuesday is upon us. The work week will hopefully go by quickly, as it’s a 3-day weekend coming up. Of course, I’m excited about any weekend, but a 3-day is just that much better. To help speed things along, I’m gonna be going with some gaming podcasts while I work on proofing rulebooks […]
Categories: Game Theory & Design

Data Policy

New Drupal Modules - 22 May 2018 - 10:28am

The Data Policy module helps site owners or administrators with informing their users about which (personal) data is collected.

Next to providing functionality for informing users it also has the ability to add a data policy. It can be configured that users are prompted to accept the latest active data policy.

Categories: Drupal

Battlefront Posts UK Open Day Info, Previews Exclusive Mini

Tabletop Gaming News - 22 May 2018 - 10:00am
Battlefront’s UK Open Day is coming up next month. It’s a chance to go out and hang out with the game designers, ask them questions, learn all about what they’ve got planned for their different games, and pick up a sweet exclusive figure. Everyone loves exclusive figures, and this one rocks! Have a peek for […]
Categories: Game Theory & Design

UI Patterns Block

New Drupal Modules - 22 May 2018 - 9:02am

A simple module that allows UI patterns previews to be exposed as blocks. To use, install the module and visit the blocks page. Click "Place block" by a region of your choice, select the UI Patterns block and then select the desired pattern preview to render.

Categories: Drupal

Mordenkainen’s Tome of Foes Up On Roll20

Tabletop Gaming News - 22 May 2018 - 9:00am
Roll20 is the perfect way to play RPGs with your friends all over the world, online, in real time. And they’re making sure that you get the latest books available for the most popular RPGs as soon as possible. As such, they’ve got Mordenkainen’s Tome of Foes available for purchase and support on their site. […]
Categories: Game Theory & Design

How Startups Are Keeping Innovation Alive in the Social Casino Sector - by Daniel Kashmir

Gamasutra.com Blogs - 22 May 2018 - 8:54am
All of the money being poured into the social casino space should have made it more difficult for small, independent studios to compete. Instead, these startups are thriving by finding ways to keep innovating on the genre.
Categories: Game Theory & Design

Cuzzle

New Drupal Modules - 22 May 2018 - 8:37am

Cuzzle is a PHP library that formats Guzzle HTTP requests as a cURL command. With this module, all outbound HTTP requests are logged in a way that can be copied and run locally.

Categories: Drupal

Fantasy Flight Previews Actions in X-Wing

Tabletop Gaming News - 22 May 2018 - 8:00am
The X-Wing Miniatures Game is getting its first new edition. Obviously, being the popular game that it is, people like how the game works. But that doesn’t meant here’s not room for improvement and change. In this preview, we get a look at how Actions work in the game. Are they exactly the same as […]
Categories: Game Theory & Design

Ashday's Digital Ecosystem and Development Tips: Should You Hire In-House Programmers as Employees or Outsource to a Consulting Firm?

Planet Drupal - 22 May 2018 - 7:30am

Well sure, ok, maybe we might be slightly biased on this. We are, as it turns out, a consulting firm in the business of selling outsourced programming. Ahem...

But, nonetheless, I’ll try to be reasonably fair and balanced here. As a consultancy I think we have, in fact, a unique vantage point on such matters, since we spend each day of our lives straddling both sides of this topic: That is, we sell outsourced programming to organizations for whom outsourcing is a good fit; whereas we ourselves hire in house staff programmers, i.e. we are an organization for whom outsourcing is not a good fit.

Categories: Drupal

Game Design Beyond Screens & Joysticks - Game Interaction Loop (2/5) - by Tatiana Vilela dos Santos

Gamasutra.com Blogs - 22 May 2018 - 7:12am
Tatiana Vilela dos Santos is an indie game designer and digital artist. She makes games with unique physical interfaces and new technologies, all part of her interactive multimedia project MechBird. She gave in March 2018 a 60 minutes long talk at the GDC
Categories: Game Theory & Design

Five Productivity Tips for Solo Devs - by Shane Neville

Gamasutra.com Blogs - 22 May 2018 - 7:10am
Working solo is hard. Procrastination, distraction and lack of motivation can destroy a project. Here are five simple tips to help solo developers stay productive and finish their games.
Categories: Game Theory & Design

What’s New in Unity 2018.1 Beta? - by Dr. Michael Garbade

Gamasutra.com Blogs - 22 May 2018 - 7:10am
The 4 main new features introduced in Unity 2018.1 beta are Scriptable Render Pipelines (SRP), Shader Graph, the C# Job System, and Particle System Improvements.
Categories: Game Theory & Design

How we were able to offer a free EARTHLOCK upgrade to all customers - by Bendik Stang

Gamasutra.com Blogs - 22 May 2018 - 7:05am
This is a post about how we finally were able to ensure that all our customers who bought the initial version could get the new extended game for free.
Categories: Game Theory & Design

How To Create An Indie Game Whilst Holding Down A 10 Hour A Day Job, Being A Husband And Father – Part 3 - by Stavros Pilatis

Gamasutra.com Blogs - 22 May 2018 - 7:03am
The third part in a series where I dicuss how I created, GLO, my first commercial game and released it to Steam in 3 months, whilst also juggling being a father, holiding down a 10 hour a day job and taking part in a fitness transformation competition.
Categories: Game Theory & Design

Group Pathfinding & Movement in RTS Style Games - by Andrew Erridge

Gamasutra.com Blogs - 22 May 2018 - 7:02am
A practical approach to problems making group movement feel good and coordinated in an RTS style game.
Categories: Game Theory & Design

How Hard is Too Hard? - by No Moss Studios

Gamasutra.com Blogs - 22 May 2018 - 7:02am
Reuben from No Moss Studios talks about how the decisions that went into balancing a game that was intentionally trying to be hard. Where is the line between hard and frustrating?
Categories: Game Theory & Design

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